What changed in this filing

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Item 1. Business

2023-02-16 compared with 2022-02-17 · 90 added, 70 removed, 103 unchanged (61% of the section changed)

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We provide our customers with high-value-add warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale.

As of December 31, 2021, we operated in approximately 906 facilities worldwide, totaling 195 million square feet of space that we operate primarily on behalf of large corporations, that have outsourced their warehousing, distribution and other related activities to us.

Our revenue is diversified among hundreds of customers, including many multinational corporations, across numerous verticals.

As of December 31, 2022, our approximately 135,000 team members operated in 979 facilities worldwide totaling 197 million square feet of space, primarily on behalf of large corporations, that have outsourced their warehousing, distribution and other related activities to us.

Our revenue is diversified among over one thousand customers, including many multinational corporations, across numerous verticals.

Our customers rely on us to move their goods with high efficiency through their supply chains — from the moment inbound goods arrive at our logistics sites, through fulfillment and distribution, and the management of returned products.

Our customer base includes many blue-chip leaders in sectors that demonstrate high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics services.

The Separation

On August 2, 2021, the Company completed its separation from XPO Logistics, Inc.

(“XPO”) (the “Separation”) and began regular-way trading of the Company’s common stock on the New York Stock Exchange under the ticker symbol “GXO.” GXO was incorporated as a Delaware corporation in February 2021.

The Separation was completed under a Separation and Distribution Agreement and various other agreements that govern aspects of the Company’s relationship with XPO, including, but not limited to a Transition Services Agreement, a Tax Matters Agreement (“TMA”), an Employee Matters Agreement (“EMA”) and an Intellectual Property License Agreement.

For additional information regarding the agreements executed in connection with the Separation see Note — 3 The Separation to our consolidated financial statements.

GXO became a standalone publicly traded company on August 2, 2021, when GXO Logistics, Inc.

completed its separation (the “Separation”) from XPO, Inc.

(“XPO”) and began regular-way trading on the New York Stock Exchange under the ticker symbol “GXO.” GXO was incorporated as a Delaware corporation in February 2021.

On May 24, 2022, the Company completed the acquisition of Clipper Logistics plc (“Clipper”), an omnichannel retail logistics specialist based in Leeds, England (the “Clipper Acquisition”).

See Item 8 of Part II, “Financial Statements and Supplementary Data — Note — 4 Acquisitions” to the Consolidated Financial Statements for additional information.

Drivers of Value Creation

We have identified five key drivers of value creation in our business:

Critical Scale in a Fast-Growing Industry with Strong Secular Tailwinds:

We are the largest pure-play contract logistics provider in the world.

Our significant scale makes us well-positioned to benefit from the logistics industry’s predominant tailwinds — the growth in consumer demand for e-commerce and omnichannel retail, the rapidly increasing customer demand for warehouse automation and other digital supply chain capabilities, and the secular shift in logistics toward outsourcing.

GXO Operates in a Massive Market that is Growing Rapidly Due to Strong, Secular Tailwinds.

GXO is the largest pure-play contract logistics provider in the world.

Our significant scale makes us well-positioned to benefit from the logistics industry’s predominant tailwinds — the secular shift in logistics toward outsourcing, the growth in consumer demand for e-commerce and omnichannel retail, and the focus on ensuring supply chain resilience that is driving higher inventory levels and nearshoring and re-shoring.

Over the last five years, the outsourced portion of the market has outgrown the broader market.

We expect this outperformance to continue as the benefits of economies of scale and rising technological complexity make the outsourced offering even more compelling.

E-commerce is increasing as a share of overall commerce and will continue to do so.

E-commerce creates demand for a far greater degree of sophistication throughout the fulfillment process, and a compelling revenue-multiplier effect for GXO.

Additionally, more E-commerce also means more returns:

roughly one in three items are being returned in the E-commerce environment based on third party research.

The increased touchpoints mean higher revenue capture for the warehouse provider.

Supply Chain Resilience:

The need to make supply chains more resilient has driven a trend towards holding more inventory – the concept of just-in-case, rather than just–in–time.

Additionally, we expect many industries to follow the trend of pursuing resiliency in their supply chains through near-shoring.

GXO has Strong Competitive Advantages that have Enabled it to Grow Faster than the Broader Market.

Robust Technological Differentiation:

Increasingly, customers want technology-enabled, highly customized solutions that incorporate intelligent automation and data science.

Order fulfillment times are compressing, and new channels are emerging as companies seek to improve the efficiency, speed and visibility of their supply chain activities, notably in the e-commerce and omnichannel retail channels.

Our focus as an innovator is on helping our customers meet the expectations of their customers, with reliable outcomes, more visibility and greater efficiency.

The most effective way to meet these expectations is through outsourced solutions that provide advanced automation, digital visibility and intelligent machines, such as robotics and autonomous goods-to-person systems — all capabilities we offer today.

Long-Term Customer Relationships in Attractive Verticals:

Order fulfillment times are compressing, and

new channels are emerging as companies seek to improve the efficiency, speed and visibility of their supply chain activities, notably in the e-commerce and omnichannel retail channels.

GXO leads the industry in automation levels.

Our focus as an innovator is helping our customers meet the expectations of their customers, with reliable outcomes, more visibility and greater efficiency.

Furthermore, we keep close tabs on innovation and are constantly testing numerous large and small technology opportunities, and our team has a unique and deep understanding of how to deploy this sophisticated technology.

Across core verticals, we see a strong correlation between automation and market share growth, as our technological advantages enable us to offer continuous improvement opportunities to customers over the life of a contract, which is a powerful driver of retention and growth.

Global Scale:

GXO’s ability to serve multinationals around the world is another key driver of our growth.

We have established leading market positions across North America, Western Europe, and the UK, and we have built scale positions across the following, highly attractive verticals – omnichannel retail and consumer packaged goods;

food and beverage;

industrial and manufacturing;

as well as tech and consumer electronics.

Our customer portfolio includes long-term relationships with blue-chip market leaders and world-class brands, including Fortune 100 and Fortune Global 500 companies.

Our customers operate in sectors with high-growth outsourcing opportunities, such as e-

commerce, omnichannel retail, consumer technology, food and beverage, industrial and manufacturing, and consumer packaged goods.

We have extensive experience in these verticals and we understand the specific requirements for quality control, real-time visibility, special handling, security, complex stock-keeping, time-assured deliveries and agility during surges in demand.

The average relationship tenure for our top 20 customers in 2021, based on revenue, was over 15 years.

Resilient Business Model with Multiple Drivers of Profitable Growth:

The vast majority of our contracts with customers are multi-year agreements, with facility lease arrangements that generally align with contract length.

Historically, our customer retention rate has been over 90%.

Additionally, our business requires limited maintenance capital spending, which provides us with the flexibility to adjust our overall capital spending to changes in the macro environment.

We are committed to the ongoing deployment of our technology in areas such as labor productivity, warehouse management, inventory management, demand forecasting and advanced automation to maximize stockholder value.

Experienced and Cohesive Leadership:

Importantly, scale enables us to continuously learn and improve shared knowledge across our verticals and our large, diversified customer base to create more value.

Trusted expertise:

Our executives have decades of experience in their respective fields and work together to create sustainable value through operational excellence and a purposeful culture.

Our executives foster a company culture that is safe, respectful, entrepreneurial, innovative and inclusive, with a focus on diversity, inclusion and belonging that continues to shape our recruitment efforts and work environments.

Our strategy is to help our customers manage their supply chains for optimal efficiency, using our network of people, technology and other physical assets.

We have extensive experience in our core verticals, and we understand the specific requirements for quality control, real-time visibility, special handling, security, complex stock-keeping, time-assured deliveries and agility during surges in demand.

The average relationship tenure for our top 20 customers in 2022, based on revenue, was over 15 years, and our revenue retention rate is above 90% each year.

GXO has a Resilient Business Model with Multiple Drivers of Profitable Growth

High Quality Growth:

First, our long-term relationships, have an average contract and lease term of five years.

Second, our pricing framework is managed through contractual terms and includes escalations for inflation.

Third, our stable revenue base is diversified by customer, vertical and geography, making GXO resilient through different parts of the cycle.

Additionally, no customer represented more than 4% of our total revenue in 2022.

Fourth, our customers are high-quality companies, and the vast majority of our top-100 credit rated customers are Investment Grade.

Continuous Improvement and Productivity:

GXO expects to generate meaningful margin expansion from an increase in large scale automation, further implementation of adaptive technologies, completion of central efficiency projects, and the realization of synergies from the 2022 acquisition of Clipper.

We design and operate the most advanced warehouse solutions in the world.

Our strategy is to help our customers manage their warehouses for optimal efficiency, using our network of people, technology and other physical assets.

We deliver value to customers in the form of technological innovations, process efficiencies, cost efficiencies and reliable outcomes.

Our services are both highly responsive to customer goals, such as increasing visibility in the supply chain, decreasing fulfillment times and mitigating environmental impacts and being proactive in identifying potential improvements.

Our strategy addresses growth and optimization by focusing on consumer-related sectors that demonstrate enduring demand over time and where we already have a deep presence.

GXO creates short- and long-term value for customers and shareholders through our unique combination of technology, scale and expertise.

Our strategy addresses growth and optimization by focusing on core verticals that demonstrate enduring demand over time and where we already have a deep presence.

We expect to attract new customers and expand the services we provide to existing customers through new projects, thus earning more of their external and internal logistics spend.

We intend to integrate best practices to drive productivity, with a focus on automation and other levers of profitable growth.

We integrate best practices to drive productivity, with a focus on automation and other levers of profitable growth.

To aid in executing our strategy, we have instilled a culture that focuses on delivering mutually beneficial results for our customers and our company with the highest legal and ethical standards and clear policies and practices to support compliance throughout our organization.

Technology and Intellectual Property

Our industry is evolving and customers want to reduce risk and increase the productivity of their supply chains.

We are well-positioned to meet these expectations because we have prioritized visibility, quality control and automation in our technological development.

Contract logistics is growing more and more complex, as changing consumer expectations and preferences continue to drive a need for faster delivery times, higher levels of returned inventory, and better visibility throughout the supply chain.

Traditional warehousing solutions are no longer sufficient to fill these needs.

The industry needs scaled technology players, like GXO, to deliver these complex solutions.

Technology is a core competitive advantage for GXO and fundamental to how we win and retain business.

GXO was an early adopter of technology and operates more than 30% of technology-enabled warehouses compared to the industry average of roughly 8%.

Technology enables us to add value to our customers’ end-to-end operations in terms of cost, efficiency, accuracy, and environmental impact.

Investments in cutting-edge technology are a major growth driver for our business.

Our highly scalable platform is built on the cloud to speed the deployment of new ways to increase efficiency and leverage our footprint.

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Labor and Inventory Management

Our productivity is driven by our comprehensive “Smart” suite of intelligent tools and analytics designed to optimize labor and inventory management.

Our productivity is driven by our comprehensive suite of intelligent tools and analytics designed to optimize labor and inventory management.

This technology incorporates dynamic data science, predictive analytics and machine learning to aid decision-making.

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Intelligent Warehouse Automation

Our intelligent warehouse automation includes deployments of autonomous robots and cobots, automated sortation systems, automated guided vehicles, goods-to-person systems and wearable smart devices — these are all effective ways to deliver critical improvements in speed, accuracy and productivity.

Our intelligent warehouse automation includes deployments of autonomous robots and cobots, automated sortation systems, automated guided vehicles, goods-to-person systems and wearable devices — these are all effective ways to deliver critical improvements in speed, accuracy and productivity.

Importantly, automation also enhances safety and the overall quality of employment.

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We provide our customers with high-value-add warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services.

We provide services to customers globally, including Fortune 100 companies in the U.S., European multinational market leaders and other renowned global brands.

We provide services to customers globally, including Fortune 100 and Fortune Global 500 companies in the U.S., European multinational market leaders and other renowned global brands.

The customers we serve are primarily in North America and Europe and operate in every major industry.

The diversification of our customer base reduces concentration risk.

In 2021, our top five customers combined accounted for approximately 17% of our revenue.

Our revenue is highly diversified due to our expertise across a range of key verticals, reflecting our customers’ principal industry sector.

In 2021, 53% of our revenue was from e-commerce, omnichannel retail and consumer technology;

17% from food and beverage;

13% from industrial and manufacturing;

10% from consumer packaged goods;

and 7% from other industries, with the vast majority of our revenue generated in the U.K., U.S., France, Netherlands, and Spain.

In 2022, our top five customers combined accounted for approximately 16% of our total revenue, and no customer represented more than 4%.

Our revenue is highly diversified due to our expertise across a range of key verticals, reflecting our customers’ principal industry sectors.

In 2022, 41% of our revenue was from Omnichannel retail, 15% from Technology and consumer electronics, 15% from Food and beverage, 12% from Industrial and manufacturing, 10% from Consumer packaged goods and 7% from other industries, with the vast majority of our revenue generated in United Kingdom, United States, France, Netherlands and Spain.

Our revenue and profitability are typically lower in the first quarter of the calendar year relative to other quarters.

This is due in part to seasonality, namely the post-holiday reduction in demand experienced by many of our customers, which leads to less use of the logistics services we provide.

Our business benefits from strong positioning in the e-commerce sector, where demand is characterized by seasonal surges in activity, with the fourth quarter holiday peak typically being the most dramatic.

We operate in a highly competitive global industry with a highly fragmented marketplace where thousands of companies compete domestically and internationally.

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Our competitors include local, regional, national and international companies that offer services similar to those we provide.

Our competitors include Clipper Logistics, DHL, DSV Panalpina, Kuehne + Nagel, Geodis and ID Logistics.

Our competitors include DHL, DSV, Kuehne + Nagel International, GEODIS and ID Logistics.

Due to the competitive nature of our marketplace, we strive daily to strengthen and expand existing business relationships and forge new relationships.

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Historically, we have successfully resolved potential environmental exposure without a material effect on our business or operations.

We believe that our operations are in compliance with current laws and regulations and we do not know of any existing environmental condition that reasonably would be expected to have a material adverse effect on our business or operating results.

We believe that our operations are in compliance with current laws and regulations and we do not know of any existing environmental law, regulation nor condition that reasonably would be expected to have a material adverse effect on our business, capital expenditures, or operating results.

However, future changes to environmental laws or regulations may impact our operations and could result in increased costs.

A number of our sites are ISO 14001-certified to high standards for environmental management, and we have implemented numerous programs to manage environmental risks and maintain compliance in our business.

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If enacted, such legislation could result in reduced productivity and efficiency and increased operating expenses, all of which could adversely affect our results of operations.

Our revenue and profitability are typically lower in the first quarter of the calendar year relative to other quarters.

This is due in part to seasonality, namely the post-holiday reduction in demand experienced by many of our customers, which leads to less use of the logistics services we provide.

Human Capital

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Employee Profile

As of December 31, 2021, we operated with approximately 120,000 team members (comprised of approximately 75,000 full-time and part-time employees and 45,000 temporary workers engaged through third-party agencies) in 28 countries.

As of December 31, 2022, we operated in 28 countries with approximately 135,000 team members (comprised of 89,000 full-time and part-time employees and 46,000 temporary workers engaged through third-party agencies).

Our workforce is located as follows:

42% were based in the U.K., 29% were based in North America, 26% were based in Europe (excluding the U.K.) and 3% were based in Latin America and Asia combined.

majority of our employees in Europe and the U.K.

were covered by collective bargaining agreements, while none of our employees in North America were covered by collective bargaining agreements.

As of December 2021, approximately 35% our global workforce was comprised of women.

In the U.S., 66% of our workforce were ethnic minorities as of December 2021.

We have made significant investments in the safety, well-being and satisfaction of our employees in numerous areas, including:

diversity, inclusion and belonging;

42% in the United Kingdom, 30% in Europe (excluding the United Kingdom), 26% in North America and 2% were based in Latin America and Asia combined.

The majority of our employees in Europe and United Kingdom were covered by collective bargaining agreements, while none of our employees in North America were covered by collective bargaining agreements.

As of December 31, 2022, approximately 34% of our global workforce was comprised of women, and 66% of our workforce in the U.S.

were ethnic minorities.

We have made significant investments in the safety, well-being and satisfaction of our employees in numerous areas, including diversity, inclusion and belonging;

health and safety;

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Diversity, Inclusion and Belonging

We take pride in having an inclusive workplace that encourages a diversity of backgrounds and perspectives and mandates fair treatment for all individuals — these attributes of our culture make us a stronger organization and a better partner to all GXO stakeholders.

We take pride in having an inclusive workplace that encourages a diversity of backgrounds and perspectives and mandates fair treatment for all individuals.

These attributes of our culture make us a stronger organization and a better partner to all GXO stakeholders.

We welcome employees of every gender identity, sexual orientation, race, ethnicity, national origin, religion, life experience, veteran status and disability.

In November 2021, we appointed a Vice President of Diversity, Inclusion and Belonging and we have launched a Sustainability Steering Committee and Diversity and Inclusion Steering Committee in Europe and the Americas whose strategies will include support and contributions for our environmental, social and governance commitments and ongoing annual community engagement events.

In November 2021, we appointed a Vice President of Diversity, Inclusion and Belonging and we have launched a Sustainability Steering Committee and Diversity and Inclusion Steering Committee in Europe and the Americas whose strategies include support and contributions for our Environmental, Social and Governance (“ESG”) commitments and ongoing community engagement events.

Health and Safety

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Bureau of Labor Statistics.

We deployed a comprehensive array of protective measures and technology to maintain a safe workplace environment as a result of the COVID-19 pandemic.

We have taken many risk-mitigating actions to protect our employees, including offering 100% paid pandemic sick leave for eligible employees, procuring personal protective equipment for employees in all of our workplaces, and providing expanded access to mental health counseling services for employees and their dependents.

Talent Development and Engagement

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In this way, our employees help drive the continuous improvement of our business.

We seek to identify top talent in all aspects of the recruitment process, and we emphasize training and development.

We seek to identify top talent in all aspects of the recruitment process, and we emphasize training and development supported by our own GXO University.

We tailor our recruitment efforts by geography and job function using an array of channels to ensure a diverse candidate pool.

Our talent development infrastructure provides resources to employees who aspire to grow throughout their career, such as tailored skills development, training and mentoring.

In addition, we maintain a robust pipeline of future operations leaders by using structured sponsorships and additional learning techniques to develop internal candidates who demonstrate high potential in supervisory roles into site leader positions.

Our programs also serve to retain top talent by defining personalized development paths and attract new talent by differentiating GXO as an employer of choice.

Our talent development infrastructure provides resources to employees who aspire to grow throughout their careers, such as tailored skills development, training and mentoring.

Our programs also retain top talent by defining personalized development paths and attract new talent by differentiating GXO as an employer of choice.

Expansive Total Rewards

We offer a competitive compensation package to help attract and retain outstanding talent.

We offer competitive wages and a comprehensive suite of benefits to all employees to maintain our positioning as an employer of choice in the talent marketplace.

A number of the benefits we offer were introduced in response to employee feedback — in

the U.S., examples include our pregnancy care policy, family bonding policy, tuition reimbursement program for continuing education, and benefits such as diabetes management, supplemental insurance and short-term loans.

We offer competitive wages and a comprehensive suite of benefits to all employees to maintain our position as an employer of choice in the talent marketplace.

A number of the benefits we offer were introduced in response to employee feedback — in the U.S., examples include our pregnancy care policy, family bonding policy, tuition reimbursement program for continuing education, and benefits such as diabetes management, supplemental insurance and short-term loans.

In Europe, the benefits offered vary by country and are tailored to the needs of the local markets.

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Available Information

Our corporate website is www.gxo.com.

On this website, you can access, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S.

Securities and Exchange Commission (SEC).

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our corporate website at www.gxo.com.

Materials are available online as soon as reasonably practicable after we electronically submit them to the SEC.

You can also access materials regarding our corporate governance policies and practices, including our Corporate Governance Guidelines, Code of Business Ethics and the charters relating to the committees of our Board of Directors.

You also may request a printed copy of

these materials without charge by writing to:

Investor Relations, GXO Logistics, Inc., Two American Lane, Greenwich, Connecticut 06831.

Further materials regarding our corporate governance policies and practices, including our Corporate Governance Guidelines, Code of Business Ethics and the charters relating to the committees of our Board of Directors are also available on the investors section of our website.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business